Investment Program of the Federal Government: A Comprehensive Analysis
The Federal Government presented a draft law for a tax investment immediate program in June 2025, aimed at strengthening Germany as a business location and improving the economic situation through tax relief. This program will be reviewed for the first time and could have significant impacts on savers and investors, as it may influence economic stability and future investments.
Objectives of the Investment Program
The main goal of the program is to encourage companies to invest in Germany rather than wait. It is intended to serve as the first step towards more comprehensive tax reforms, particularly supporting small and medium-sized enterprises (SMEs) through greater liquidity, better depreciation options, and tax planning security.
Measures of the Investment Program
- Investment Booster: Declining Depreciation
The reintroduction and increase of declining depreciation options to 30 percent for movable assets is intended to encourage companies to invest in new technologies and equipment. - Reduction of Corporate Tax
The corporate tax rate is to be gradually reduced from 15 percent to 10 percent by 2032 starting January 1, 2028. This is intended to increase attractiveness for corporations. - Relief for Partnerships
The tax rate on retained earnings is to be reduced in three steps from the current 28.25 percent to 25 percent starting in 2032. - Promotion of Electric Vehicles
A stronger tax incentive for electric vehicles is planned, including an increase in the maximum price limit for tax-privileged electric company cars. - Research Allowance
The tax research allowance is to be expanded to promote investments in research and development (R&D).
Financing and Effects
The program provides for a relief volume of 2.5 billion euros for the current year, which is expected to rise in the following years to 8.1 billion euros in 2026, 11.8 billion euros in 2027, twelve billion euros in 2028, and 11.3 billion euros in 2029. The tax shortfalls will gradually increase to around 17 billion euros annually from 2029 and will be distributed among the federal government, states, and municipalities.
Impact on Savers and Investors
The measures could influence economic stability and future investments by encouraging companies to invest in Germany. This could lead to increased economic activity, which could have positive effects on the labor market and economic growth. For savers and investors, this could mean that investments in German companies become more attractive, as they may benefit from tax relief and investment incentives.
Criticism and Challenges
Critics argue that the real investment barrier in Germany is the yet to be approved federal budget for 2025. Additionally, the financing of the program through tax shortfalls could pose long-term challenges for public finances. Therefore, the implementation and actual effects of the program will be closely monitored.